View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by UPCommons. Portal del coneixement obert de la UPC Títol: Benetton and Zara information systems:a comparative analysis Volum:I de I Alumne: Chiara Pirone Director/Ponent:Jose M.Cabré Garcia Departament:Organización de Empresas Data: 28 Junio 2010 DADES DEL PROJECTE Títol del Projecte:Benetton and Zara information systems:a comparative analysis Nom de l'estudiant:Chiara Pirone Titulació:Ingenieria superior Informatica Crèdits: 37.5 Director/Ponent:Jose M.Cabré Garcia Departament:Organización de Empresas MEMBRES DEL TRIBUNAL President:Ferran Sabate Carriga Toma de decisiones y gestión de proyectos empresariales(PDGPE) Vocal:Francesc Tiñena Salvañà Compresion de datos e imagen (CDI) Secretari:Jose M. Cabré Garcia Empresa y entorno economico(EEE) QUALIFICACIÓ Qualificació numèrica: Qualificació descriptiva: Data: INDEX CHAPTER 1: INTRODUCTION 7 CHAPTER 2: VERTICAL INTEGRATION 9 2.1. VERTICAL INTEGRATION 9 2.2: THE THREE A’S OF A SUPPLY CHAIN EXCELLENCE 13 2.2.1: AGILITY 15 2.2.2: ADAPTABILITY 16 2.2.3: ALIGNMENT 17 2.3: PORTER’S ANALYSIS 19 2.4: EXAMPLES: WAL-MART AND DELL 30 CHAPTER 3: THE SYSTEM LOCK-IN 36 3.1 THE DELTA MODEL 36 3.2: THE SYSTEM LOCK-IN 39 3.3: EXAMPLE: FORD MOTOR CO 41 3.3.1: FORD MOTOR CO LOCK-IN 42 CHAPTER 4 : ZARA 45 4.1 ZARA’S HISTORY 45 4.2 BUSINESS MODEL 47 4.2.1: PORTER’S ANALYSIS ON ZARA 47 4.2.2 PRODUCT LIFE CYCLE CURVE 49 1 4.2.3: KEY FACTORS OF SUCCESS 50 4.2.4: STRATEGIC DRAWBACKS 51 4.2.5: LOGISTICS AND SUPPLY CHAIN 54 4.2.6: STRATEGY 59 4.2.7: OPPORTUNITIES 65 4.3 THE MATHEMATICAL MODEL 66 4.4 FINANCIAL DATA 71 4.5 COMPETITORS 73 CHAPTER 5 : BENETTON 76 5.1 BENETTON’S HISTORY 76 5.2 BUSINESS MODEL 83 5.2.1: STRENGHTS 83 5.2.2: WEAKNESSES 84 5.2.3:PARTNERSHIP 88 5.2.4: INTEGRATION 90 5.2.5: SUPPLY CHAIN HISTORY 91 5.2.6: NETWORKED MANUFACTURING 93 5.2.7: POSTPONEMENT IN DYEING 94 5.3: INFORMATION SYSTEM 96 5.3.1: THE SHOP 99 2 5.4: FINANCIAL DATA 101 5.5: COMPETITORS 103 CHAPTER 6 : QUICK RESPONSE 107 6.1: FAST FASHION 107 6.2: GLOBAL QUICK RESPONSE 108 6.2.1: ACHIEVING GLOBAL QUICK RESPONSE 109 6.2.2: THREE KEY PROCESSES 111 6.3 :ZARA 121 6.4: BENETTON 123 CHAPTER 7 : ECR 125 7.1: ECR’S HISTORY 126 7.2: A COLLABORATIVE SOLUTION 127 7.3 STRATEGIES 127 7.4: PROCESSES 128 7.5: ENABLING TECHNOLOGIES 129 7.6: MAKING THE CHANGE TO ECR 130 7.7: ADOPTION ISSUES 130 7.8: OBSTACLES AND BENEFITS 131 7.9 : DISCUSSION AND CONCLUSIONS 132 7.10: FUTURE RESEARCH 134 3 CHAPTER 8 : CONCLUSIONS 135 CHAPTER 9: PLANNING 136 9.1:INITIAL PROJECT PLANNING 136 9.2: REAL TIME PLANNING 137 9.3: JUSTIFICATION 137 9.4: ECONOMIC ANALYSIS 138 CHAPTER 10: REFERENCES 141 4 LIST OF FIGURE Figure 2.1: Foundations of adaptive supply chains 16 Figure 2.2: foundation of aligned supply chains 19 Figure 2.3 : Porter’s value chain 21 Figure 2.4: Porter’s strategies 24 Figure 2.5: Wal-Mart approach 32 Figure 2.6: Dell’s approach 35 Figure 3.1: The Delta model 36 Figure 4.1: Zara’s timeline 46 Figure 4.2: Porter’s five forces model 47 Figure 4.3 : Typical product life curve 49 Figure 4.4 : Zara’s production life cycle curve 50 Figure 4.5: Zara’s business model 51 Figure 4.6 : Inventory, Information and Speed 58 Figure 4.7: Inditex’s net sale – net income 72 Figure 4.8 : Inditex’s ROE 72 Figure 4.9: Zara’s competitors 73 Figure 5.1: Benetton’s collection 82 Figure 5.2: Benetton’s timeline 83 Figure 5.3: first Benetton supply chain model 91 Figure 5.4: New Benetton’s supply chain orientation 92 Figure 5.5: timeline of Benetton’s supply chain development 93 Figure 5.6: Dye and Knit VS Knit and Dye 95 Figure 5.7: Benetton’s revenues-net Income 101 Figure 5.8 : Benetton’s revenues by regions 102 Figure 5.9: Benetton’s performance indicators (ROE, ROI, ROS) 102 5 Figure 6.1 : generic high-level structure of globally dispersed clothing 106 supply chains. Figure 6.2 : Staged planning postponement and flexible open pipelines 120 Figure 6.3 :Zara’s demand driver approach 123 Figure 9.1: initial planning 136 Figure 9.2: real planning 137 Figure 9.3: table of costs 139 6 CHAPTER 1 : INTRODUCTION The clothing sector is fundamental to the world economy. International trade in the combined sector has increased 60-fold during the past 40 years, a period characterised by major increases in the globalisation of business, deregulation and the gradual removal of quotas. The clothing industry is also one of the most mobile industries in the world. Over the last two decades complex global supply networks have emerged to supply clothing to world markets. The nature of these global networks poses significant challenges for quick and accurate response in the clothing sector. Ensuring the right product volume and mix within retail stores from a globally dispersed supply network requires innovative operational strategies and practices. The purpose of this project is to use supply management as a tool in analysing the global sourcing processes and activities within two successful leading textile companies: Zara and Benetton; to describe their logistics and supply chain processes in order to understand how these two companies can add a good value to its customers, to its stakeholders and to its suppliers. Pressure for companies to create and deliver value to customers manifests itself in every stage of the business today. Therefore, it is significant to compare and to contrast these two companies' activities and processes which lead them to success. After a brief introduction about vertical integration, are described these two companies: the business model, the strategy, the strengths, the weaknesses, the information solutions adopted, some financial data and the biggest competitors. An important point of comparison is the solution of the need of this market of a quick response (QR). Finally are described a solution that is adopted in the grocery industry and that can be adopted as well in the clothing industry (ECR). The interest in this subject born from my Italian study in management engineering; as well an interest in informatics solutions grow from my Spanish study at FIB. Because of my permanence in Spain I choose to compare an Italian company with a Spanish one. This project is realised as a Final Project both in Italy and Spain with the supervision of a Spanish professor, Jose M. Cabré Garcia, and an Italian professor, Massimo Visconti, too. 7 Project description This project would analyse two big companies in the clothing industry : Zara and Benetton. The objective is to compare the two model above all in the view of vertical integration, that is how the vertical integration is supported by the information technology. The idea is to study the strengths and the weaknesses of these two model in order to suggest a possible informatics solution that allow to improve the efficiency and the satisfaction with the consumer. Motivation I choose to develop this project because of : - My interest in clothing industry - Application of my knowledge acquired during my study in management engineering - My interest in a Spanish company, taking advantage of my permanence in Spain - My interest in IT, due to my study en la FIB 8 CHAPTER 2 : VERTICAL INTEGRATION 2.1: VERTICAL INTEGRATION In microeconomics and management, the term vertical integration describes a style of management control. It is grounded on the acquisition by a company operating in one market of another company which is complementary to its existing business (as a supplier or user of product) but which operates in another market. That is that the vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers. Contrary to horizontal integration, which is a consolidation of many firms that handle the same part of the production process, vertical integration is typified by one firm engaged in different parts of production. Expansion of activities downstream is referred to as forward integration and expansion upstream is referred to as backward integration. Both expansions upstream and downstream are referred as balanced integration. A company exhibits backward vertical integration when it controls subsidiaries that produce some of the inputs used in the production of its products. For example, automobile company may own a tire company, a glass company, and a metal company. Control of these three subsidiaries is intended to create a stable supply of inputs and ensure a consistent quality in their final product A company trends toward forward vertical integration when it controls distribution centers and retailers where its products are sold. Type of vertical integration where a manufacturer acquires the channel of distribution of its outputs to achieve greater economies of scale or higher market share (It was the main business approach of Ford and other car companies in the 1920s, who sought to minimize costs by centralizing the production of cars and car parts) Balanced vertical integration means a firm controls all of these components, from raw materials to final delivery. The three varieties noted are only abstractions; actual firms employ a wide variety of subtle variations. Suppliers are often contractors, not legally owned subsidiaries. Still, a client may effectively control a supplier if their contract solely assures the supplier’s profitability.